UAD 3.6 Key Changes (And Resources You Need to Know)

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We’re all hearing more and more about the new Uniform Appraisal Dataset (UAD 3.6). Some of you may have even gotten inquiries from lenders or financial institutions already.

Are you ready for it? If not, you’ll need to be very, very soon.

UAD 3.6 is a complete rethinking of how valuation data is structured, communicated, reviewed, and delivered. And whether we love it or hate it, this will soon become the way appraisal work is done.

Will this require adjustment? Absolutely. The first few reports might feel like you’re learning appraisal all over again.

The good news? Once you understand it — really understand it — you might find you actually like the new structure. You might even wonder how we ever tolerated the old forms for so long. But to get there, I’d like to walk through some of the biggest changes that caught my eye.

So grab your coffee, settle in, and let’s take a look.

The Best Place to Start

Want to get some additional education on UAD 3.6? Start with FannieMae.com/UAD. I’ll be referencing this a LOT throughout this article.

This page has lots of documents, videos, sample reports, etc., and it’s all free. But one document should be your new best friend, and that’s the Appendix F1 URAR reference guide. It’s a PDF download with a ton of information. 

Fair warning, if you’re thinking about printing it out, know this: it’s currently 375 pages. I have one printed on double-sided paper, and it’s still huge. The digital copy may be a better option, especially because it’s searchable.

Key Changes to Note:

Material Difference

One of the first things appraisers notice about the new UAD is the way property characteristics are captured. Gone are the days of squeezing every nuance into a comment box the size of a Post-it note. Instead, the new system requires us to think more like data scientists — a structured, repeatable process that logically organizes the characteristics of each property.

That includes thinking differently about what counts as a “material difference.” Appraisers have always had to consider market-relevant features, but now those distinctions need to be expressed in a standardized way.

For example, when the new UAD asks about property characteristics, it’s not just saying, “Describe the house.” It’s asking:

  • What features drive value?
  • What features define the market?
  • What features set this property apart from the competition?

Things like location, site size, garage, and condition might be material. But depending on your market, other factors like barns, outbuildings, fencing, and even access road type could also matter. The important part is consistency: describing similar qualities in similar ways across your reports.

And yes, some of you are already muttering, “Bryan, appraisers have always done this.” True. But the difference is how the information is captured. The old forms forced us to make narrative descriptions do the work of structured analysis. The new system flips that. Narrative still matters, but structured data comes first.

Comp Drive-bys

True story: There was a guy (let’s call him Steve) who was in Horse Branch, KY taking comp photos. He drove up to Hartford and stopped at a funeral home. You may wonder, “why did he stop at a funeral home?” Well, at that time, one of the funeral home’s owners, Danny Schapmire, was also an appraiser. (A great appraiser, actually, and a stellar human. He has since passed.) This county had limited data, and we’d always go ask Danny for data that we couldn’t find ourselves. 

Steve walked in and said, “Danny, I’ve got a subject property. You got any comps you know of?” 

Then, another man came into the funeral home right after him, furious, asking, “Where is he?” 

Danny immediately tried to calm him down and asked what was going on. The man said, “There was some guy in front of my house taking pictures, and his truck’s parked in front of your funeral home. If I find him, he might end up staying here.”

This guy was mad.

Danny was able to calm him down and explained, “Look, you bought your house a few months ago. He’s an appraiser like me. Part of our job is to find comparable properties, and since your house sold a few months ago, he’s using it as a comparable. He’s not casing your house or anything.”

The guy eventually left, and everything was fine in the end. But that stuff really happens, and I’m sure you have similar stories from your own experiences hunting down comp photos. I know I’ve got an abundance of them. 

The new UAD 3.6 changes the game on comp drive-bys. The reference guide states: “The creation of UAD 3.6 has allowed us to revisit this requirement. While we still require clear descriptive color photos of the front of each comparable, we have retired the requirement to inspect the comparable sales from the street.”

Personally, I’m glad they’re retiring that policy.

Ceiling Height

If you were to search for “ceiling height” within the F1 reference guide, you’ll find that one of the references (report field ID: 10.045) details when to include it, and the answer is always. But I’m going to back up real quick and read what it says about starting under walls and ceiling. 

“The appraiser must…” Must is not a suggestion, folks; must means you have to do it — i.e., “provide information about the walls and ceilings in the unit.”

The walls and ceilings row always displays in the interior features table, and you have to choose one or more of the allowable answers. So ceiling height (that is, the approximate ceiling height in the unit, rounded to the nearest foot) is always required.

How are you going to get that ceiling height? Well, I’d guess you’re going to measure it. And for those of us that use a laser or something similar, it should be pretty easy. For those of you using a tape measure — don’t. I like to tease people when we come to this one and say, “If you’re using a fiberglass tape measure, and you have to carry around a ladder and get on a ladder to measure something, videotape yourself. I want to see you doing that.” (But actually, don’t do that. It’s dangerous. Instead, invest in a laser or some sort of device where you can grab that measurement more easily.) 

Is this a big deal? That’s up to your interpretation. But whether you love or hate this change, it is a new requirement. 

Broadband Internet

Let’s talk about one of the more surprising features in the new UAD: broadband availability.

Yes, you read that right. In 2025, internet access joins the ranks of site, view, and utilities. And honestly, it’s about time. If you’ve ever tried to run your business off two bars of rural cellular service, you know that internet speed can be a real market factor.

It’s a simple question – “Is broadband internet available?” — and your answers are yes and no.

If you check “yes,” you’re confirming high-speed internet access is publicly available exclusively through a digital subscriber line, fiber optic, or cable. If you answer “no,” you’re saying public high-speed internet access is unavailable, or it’s only available through a private satellite. If it’s a satellite, it’s a no. You might say, “Well, what if it’s Starlink? Is that a satellite?” Nope, the answer is still no. 

But how do you verify it?

I’ll admit, when this initially came out, I was a little concerned. Here’s why.

A buddy of mine bought a house, and one of his conditions was, “Is there broadband readily available?” The MLS listing said yes. The seller said yes. Everybody said yes. So, he bought the house. But when he was changing the utilities over to his name, he called the internet service provider and said, “Hey, I need to schedule to get the highest speed internet access available to my house. I work at the hospital as an IT specialist, and I’ve got to be ready to spring into action at a moment’s notice, in the event something goes bad.” 

To his surprise, they said, “Sorry, but high speed internet is not available at your house.” 

He naturally responded, “Whoa, I just bought this house. This is a newer subdivision. And I was told I had broadband internet here.” And they said, “Well, it is readily available to your subdivision, and it’s even readily available to your street. The problem is, it’s across the street, not on your side of the street.”

Obviously, he wasn’t happy. In fact, he was pretty upset. The hospital could call him at 2:00 in the morning, and he’s one of the few guys there that has to be available at all times. He had to have high-speed internet. It was quite literally life-or-death, in some cases. So he asked, “Well, what do I have to do to make it available?” 

They replied, “Well, we could get it to your side of the street, and we can have somebody out there next week, but it’s going to cost you $13,000.” Excuse me? $13,000 in unexpected expenses?

So the question is: Would he have recourse against the individual that sold him that house? Honestly, I don’t know. I’m not an attorney or a judge. But he may try.

So, what if I was the appraiser in that case? And I relied on the seller or the MLS, only to find out, yikes, the internet’s not readily available. That would have been bad, right? This is why I was really concerned when I first saw this change.

Personally, I would do two things. 

1. Ask the homeowner.

My company has a questionnaire we give to homeowners. This questionnaire has lots of information that we want to ask anyway. “Has your property been offered for sale in the last 12 months? Have the kitchens and bathrooms been updated recently? When was that done?” Then we include some disclosure statements. And guess what I’m probably going to add to this questionnaire now? “Is there broadband internet available to your house?” I’ll give the definitions as prescribed in the F1 reference guide. This way, at least I have that in my work file. We always make these questionnaires part of the appraisal report.

2. Search the FCC Broadband Map.

If you go to the FCC Broadband Map at broadbandmap.fcc.gov/home, you can search by address. (Yes, it’s an actual federal website. Yes, it’s surprisingly user-friendly. I know, I was shocked too.) It’ll tell you all about broadband availability. You can also save and/or take a screenshot of the page, and add that image right into your appraisal report. I’ll be utilizing this resource in all my reports.

Environment

Another major theme in the new UAD is understanding the broader environment around the subject property. In other words:

  • What influences buyer behavior?
  • What affects value outside the four walls?
  • What external factors shape the market?

This includes everything from land use trends to hazards, public utilities, environmental risks, and much more. The new structure forces appraisers to think comprehensively — not just about the property itself, but about its context.

This isn’t busywork. It’s what we should have been doing all along. The new format simply makes the expectations clearer and the results more consistent.

Change Is Hard

Appraisers are not known for embracing change. We’re in our routine. We love our routine. 

The new UAD is a big change. Yes, it feels like a lot right now. Yes, there will be frustration. Yes, you’ll be tempted to mutter a few choice words at your computer screen. But this is the new standard. This will become your new routine. And once it is, I think you’ll be glad. And I don’t think you’ll want to go back to the way we were doing it before. 

If you want to start digging deeper, visit FannieMae.com/UAD. That’s the official site, full of documentation, resources, examples, FAQs, and even sample reports. Once you see how it all comes together, I think you’ll feel more confident about making the transition.

Be prepared, be ready to adapt, and get out there and make some money. 

Closing Thoughts: Your Biggest Asset

Before we wrap up, let me offer one little reminder: Your number-one asset in life isn’t your business, your license, your expertise, or your fancy laser measuring tool.

What is your biggest asset? You may have a nice car, a nice house, a lot of money in the bank, and those are all wonderful assets. But if you lose your car, you can get another one. If you lose your house, you can get another one. If you lose your wealth, you can rebuild. I’ve been on top of the mountain, and I’ve been at the bottom of the mountain, and everywhere in between (the top’s better, trust me). But that’s just stuff. You can replace stuff. 

Maybe it’s because I’m getting a little older, but there’s one asset I know I can’t get back.

It’s time.

Time with family. Time with friends. Life outside of work. These are the things that actually matter.

You can always write another report. But you can’t get back lost time, missed experiences, or relationships with your loved ones. So turn your phone upside down, or even better, turn it off, and enjoy that most valuable asset you have — time.

Happy appraising. Happy living. —Bryan Reynolds

 

This article has been adapted from a recent episode of the Appraisal Update Podcast with Bryan Reynolds, which you can view here:

 

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Above and Beyond

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In his leadership book, Unreasonable Hospitality, famed restaurateur Will Guidara makes the case that any business can benefit from an above-and-beyond service mindset.

Unreasonable Hospitality: The Remarkable Power of Giving People More Than They Expect

By Will Guidara. Optimism Press. 288 pages. $29.

In the opening scene of Unreasonable Hospitality, Will Guidara describes his mortification during a glittery awards banquet in London in 2010. As co-owners of the storied Manhattan restaurant Eleven Madison Park (EMP), he and chef Daniel Humm had just come in 50th place on the World’s 50 Best Restaurants list. “We slumped over and stared at our feet,” he writes.

Many owners might celebrate if their restaurant was named the 50th best on earth. Not Guidara. That “loss” devastated him because it acknowledged something that deep down, he knew — that EMP served stellar food in an elegant space, but it wasn’t breaking new ground. 

Back in his hotel room, Guidara had a flash of insight: the real innovation needed to happen front-of-house, by focusing intensely on making their customers feel “a sense of belonging.” He grabbed a cocktail napkin and jotted down two words: “Unreasonable Hospitality.” 

The phrase describes service so radically beyond the norm that doubters dismissed it as “unreasonable,” and it became a kind of mantra for Guidara. The book is, in part, a memoir of how his obsessive focus on that guiding principle helped propel EMP to the top of that 50 Best list in 2017 and earn the restaurant three Michelin stars. But in a bookstore, this book would also land on the business/leadership and motivational/self-help shelves, which is probably why it came out with Optimism Press, a publishing imprint launched by business author Simon Sinek. Sinek, in a foreword to this book, writes that Guidara’s insights about extraordinary service “have as much relevance to real estate agents and insurance brokers” as to restaurateurs. 

With that in mind, last year our company book club chose Unreasonable Hospitality as our first read. Each of us took turns leading Thursday-afternoon discussions about chapters in the book. For a half-hour every week, we met by Zoom to consider Guidara’s big ideas about how to create a company culture of extravagant hospitality. What would that level of service look like for us, as purveyors of online education and hosts of an annual conference? How could we make our customers and attendees feel that sense of belonging that Guidara describes? We marveled at Guidara’s attention to detail. In a section titled “The Littlest Things Matter,” he describes creating subtle hand signals to help wait staff get diners’ water glasses filled more quickly, and simple rules to choreograph traffic through the bustling dining room so it would flow like “ballet, not football.” 

Some of Guidara’s innovations were flashier. The “Improvisational Hospitality” chapter opens with a story that has become so famous in fine dining circles, a version of it was featured on the FX show, “The Bear.” Guidara overheard some guests from Europe chatting excitedly about the iconic culinary experiences they’d had on their visit to New York — the only one they’d missed was a street hot dog. Guidara rushed to the corner vendor and sneaked a hot dog into the kitchen for Humm to divide four ways and plate with arty whorls of mustard and relish. The diners loved it. As they paid the check, each one told him that being served that hot dog during their final dinner in New York was “the highlight not only of the meal, but of their trip.” 

The stories inspired us to find ways big and small to give each other, our industry peers, and our customers the best versions of ourselves — not only because it’s good business, we realized, but because it makes us look forward to coming to work.

Guidara and his team coined a term for over-the-top, creative acts of service like this one: Legends. And he carved out a staff position — the Dreamweaver — to create more “legendary” moments that EMP guests would remember for the rest of their lives. Our book club loved those anecdotes: a private dining room transformed into a beach for a couple whose vacation got postponed; a champagne cart converted to a beer cart for a company employee’s Budweiser-loving dad.

What makes these gifts unforgettable isn’t their lavishness, writes Guidara; it’s their thoughtfulness. Each one is bespoke, engineered for one specific person. But the EMP staff also wanted to systematize everyday acts of service, so they made tool kits to fulfill guests’ most frequent needs, such as snack boxes for diners headed straight to the airport and printed maps of the best lesser-known NYC eateries and museums. 

Admittedly, some of these elaborate gestures require generous reserves of energy and cash. But the stories inspired us to find ways big and small to give each other, our industry peers, and our customers the best versions of ourselves — not only because it’s good business, we realized, but because it makes us look forward to coming to work. “Hospitality is a selfish pleasure,” writes Guidara. “It feels great to make other people feel good.” At Appraiser eLearning, we agree.

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Understanding Fannie Mae’s New Market Conditions Adjustments Policy

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Last spring, Fannie Mae introduced a policy update that had appraisers and lenders talking. But this change was really just a reminder of what’s already standard practice: analyzing and adjusting for market conditions in every appraisal. The new guidance comes with a stronger push for appraisers to document time adjustments when the market demands it (and for the lenders who review their work to expect it).

If you’re not familiar with the term, time adjustments (aka market condition adjustments) account for how a property’s value changes over time—specifically, between the date a comparable property went under contract and the effective date of the appraisal. In a volatile market, those changes can be significant, even over the course of a few weeks.

What Spurred the New Guidance?

We saw real estate prices go crazy during the pandemic. At the time, Fannie Mae flagged a lot of appraisals for not including time adjustments, even when data supported them. When asked why, appraisers often gave the same answer: “When I make a time adjustment, the lender pushes back. It’s a headache I’d rather avoid.”

The problem wasn’t just with appraisers. Lenders, underwriters, and reviewers often saw time adjustments as problematic and unnecessary, so a lot of appraisal reports went out without acknowledging the very real market changes that had occurred.

The new policy is meant to change that mindset. By explicitly stating that market-derived adjustments (including time adjustments) are a necessary appraisal practice, Fannie Mae is sending a clear message to lenders: expect to see them. And to appraisers: you must do the analysis, every time.

What’s in the Updated Selling Guide?

Fannie Mae’s Selling Guide now includes two key additions related to market condition adjustments:

  1. Failure to make market-derived adjustments, including time adjustments, is unacceptable. If the data supports it, it should be in the report. This applies whether the market is rising, falling, or flat.
  2. Comparable sales must be analyzed for changes in market conditions. There’s no exception to this. Appraisers must analyze the data first, then decide if an adjustment is warranted based on that analysis—not the other way around.

The guide also clarifies what constitutes acceptable evidence for a time adjustment: home price indices (HPIs), statistical analyses, paired sales, modeling, or other commonly accepted methods. Bottom line: almost any credible evidence is better than none. Fannie Mae understands that appraisers in high-data urban markets may have sophisticated MLS tools, while appraisers focused on rural or unique-properties may need out-of-the-box approaches.

So, How Do I Support My Adjustments?

A big part of the update focuses on reporting. It’s not enough to simply list “+1%” or “+$70 per square foot” in your grid. Fannie Mae wants to see the math—how you arrived at that figure, what data you used, and why it applies.

The Selling Guide even includes an educational chart for lenders showing how adjustments vary depending on when each comparable went under contract. One comp might require a +2% adjustment, another +1%, and another a -1%—all in the same report—because each was tied to a different point in the market cycle. That’s normal. That’s the job: to analyze resales of the same property over time, isolating value changes that track market fluctuations. If a property sold for $200,000 two years ago and resold for $210,000 without any renovations, the $10,000 increase likely reflects market appreciation. By analyzing several of those resales, appraisers can reconcile a credible percentage adjustment.

Fannie Mae’s position? Yes, that’s an acceptable method. Again, almost any documented, reasoned analysis is better than no analysis.

Can I Use Older Sales?

The question often comes up: can you use a comparable sale older than 12 months? Absolutely. In fact, sometimes an older sale is the best sale, especially for unique properties.

Take the example of a two-story brick farmhouse built in the 1880s. In rural areas, there may be only one truly comparable home within miles, and maybe it last sold five years ago. If its physical and locational characteristics are nearly identical to the subject, that’s a better comp than a newer or dissimilar home. You’d just have to make a market condition adjustment for the five years of change, supported by data.

Another example: imagine two identical houses next door to each other, one of which sold 13 months ago. Common sense says you’d use it, making a time adjustment if necessary, rather than substituting a less comparable property just because of an arbitrary 12-month cutoff.

The Importance of Market Segmentation

Another point to ponder: not all properties in a market move in the same direction on the same schedule. A city’s overall market trend might be flat or declining, but certain segments, like starter homes, could still be in high demand and appreciating rapidly.

During the last housing crisis, large custom homes in some markets declined sharply, while smaller, more affordable homes gained value as buyers downsized. The appraiser’s job is to understand and document what’s happening in the competitive set of properties for the subject, not just in the broad market.

This means the one-unit housing trends box on the 1004 form should reflect the segment that competes directly with the subject, not an average of unrelated property types across the neighborhood. Be specific. Zoom in and see the details.

Don’t Overcomplicate Things

While the policy change stresses that you’ve got to do the analysis every time, Fannie Mae isn’t asking for a PhD dissertation in every report. Basic, common-sense market analysis—clearly summarized and supported—is often enough.

In many cases, choosing strong comps will make the market conditions adjustment much less complicated. If you have three recent, similar sales in the immediate area, the time adjustment may be obvious—or nonexistent. But you still need to document your analysis, even if it leads to a “0%” adjustment. The goal isn’t perfection; it’s credible, supported numbers.

Ultimately, this policy update is about shifting expectations. Fannie Mae wants time adjustments to be seen as normal and expected, not anomalies or headaches. Appraisers are still the local experts. It’s up to them to determine the correct rate of adjustment. Fannie Mae won’t nitpick the exact percentage as long as it’s supported by reasonable evidence.

Conclusion

The bottom line:

  • Do the analysis every time.
  • Document your reasoning.
  • Support your numbers with credible evidence.
  • Don’t ignore a relevant comparable just because it’s more than 12 months old.

And remember: it’s entirely possible to have a positive, a negative, and a zero market condition adjustment in the same report, if that’s what the data supports.

The new Fannie Mae guidance on market condition adjustments is less about changing appraisal methodology and more about reinforcing sound practice. It’s about making analysis and transparency the default, not the exception. For appraisers, this means more than just filling in a percentage. It’s about showing the work, explaining the reasoning, and making sure the report tells the full story of the market the subject property is in.

When the market is moving, buyers, sellers, lenders, and the public deserve appraisals that reflect reality. This policy is a step toward making sure they get them.

This article is adapted from this Appraisal Update Podcast episode from April, 2025.

 

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The New URAR: Finally, Uniform

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Since I started in this profession, we’ve been filling out something called the “Uniform Residential Appraisal Report.” URAR. A tidy acronym, an orderly idea. The problem, of course, is that it wasn’t uniform. Not by a long shot.

There was a form for a single-family house. Another for a condo. Another for a two- to four-unit property. Yet another for a manufactured home. You could practically fill a filing cabinet with the different “uniform” forms. Each one with its own quirks, limitations, and yes, checkboxes. Lots of checkboxes.

The first URAR came into the world in 1986, when Fannie Mae and Freddie Mac decided it might be nice if appraisers stopped sending in reports written on the backs of napkins or, worse, dictated into a tape recorder and transcribed by the typist down the hall.

By the mid-1990s, the form had become the backbone of mortgage lending. Every residential loan needed one. The problem was that “residential” meant a lot of things. It meant one house on one lot, sure. But it also meant a condo in Miami Beach, a duplex in Des Moines, or a manufactured home sitting proudly on a quarter-acre halfway between Humboldt and Gadsden.

Each property type came with its own form. Each form came with its own rules. Each rule came with its own set of misunderstandings.

So, what was “uniform” about it? Not much. If you were appraising only single-family homes in subdivisions, you might get away with only using the URAR. But step outside the tidy framework of cookie-cutter houses, and you’d need another form, an addendum, or some cobbled-together franken-design mess to tell the story. I have passed on condo appraisals in the past just to avoid dealing with the condo form.

The new URAR adapts to our needs. If the property has two units, the report expands. If it’s a condo, different sections appear. If it’s a manufactured home, the right data fields show up automatically. You no longer have to select from a menu of forms; the report builds itself around the property you’re analyzing.

It’s flexible, but structured. It’s detailed, but readable.

For the first time, lenders, regulators, and appraisers are all looking at the same thing. Not a PDF that tells a story one way for the reader and another for the database, but a unified, structured document that preserves the narrative and the data in one place.

For too long, we’ve treated appraisal as a stack of paperwork. The new URAR reframes it as a flow of data and analysis. The appraiser’s job is not to fill in blanks; it’s to interpret reality and record it in a way that others can trust, read, and reuse.

For too long, we’ve treated appraisal as a stack of paperwork. The new URAR reframes it as a flow of data and analysis. The appraiser’s job is not to fill in blanks; it’s to interpret reality and record it in a way that others can trust, read, and reuse.

Because a single-family home in Denver and a fourplex in Detroit don’t look alike, but they share the same fundamentals: location, condition, quality, and market forces. The new framework recognizes that and organizes it accordingly.

The story is still ours to tell, but the structure lets that story travel farther.

If, like me, you’ve been doing this a while, you might be tired of hearing about “big changes.” Every few years, someone promises revolution and delivers another PDF.

This one’s different.

The URAR redesign isn’t about forms, it’s about how we communicate. The goal isn’t to make the job harder; it’s to make the work more meaningful. The new report gives us room to explain, to narrate, to analyze. The structured data captures what’s measurable. The commentary captures what’s human. It’s a marriage of logic and judgment, of code and craft. Lenders get cleaner data. Regulators get consistency. Reviewers get clarity. Borrowers get transparency.

But the real winners might be the appraisers who adapt early. Because this isn’t just a technical update. It’s the new language and grammar of valuation. And those who learn to speak it fluently will find themselves more valuable than ever.

When you strip away the noise, the new URAR is about credibility. It says: here’s what the property is, here’s how I know, and here’s the data to back it up.

That’s what investors want. That’s what lenders need. And that’s what we’ve always tried to deliver, but with a mishmash of forms and addenda, and a mind-numbing complexity in presentation.

So yes, the new URAR finally earns its name. After all these years, “uniform” means something.

One report. One language. One process for every residential property type.

It’s the same notion we started with in 1986, but this time, we’ve got the technology and the discipline to make it work.

And maybe, if we get it right, the next generation of appraisers won’t have to explain what “uniform” was supposed to mean in the first place.

 

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What does “bias” in appraisal really mean?

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What constitutes “bias” in appraisal isn’t always what you expect, according to an attorney who handles cases involving appraisers.

First, let’s start with a definition we can agree on: Objectivity in appraisals means analyzing data based on well-established principles, free from bias or external pressure.

Appraisers know what external pressure looks like. Anybody who’s been in the business for as long as I have knows all about the regulatory firewalls that were enacted following the 1980s S&L crisis (FIRREA) and the 2008 financial crisis (Dodd-Frank, HVCC). There’s lots of disagreement on the legacy of these regulations, but they were undoubtedly created to address the perception of undue pressure on appraisers from financial institutions or other parties involved in transactions.

Now let’s zoom in on bias. This topic does NOT inspire feelings of neutrality in the appraisal community. That non-neutrality comes out (a bit explosively) in comments threads and appraiser forums, and sometimes even in the classroom. I’ve sat in on several of Peter Christensen’s in-person classes on bias and fair housing law, and invariably somebody in class pushes back. Sometimes the air gets pretty hot and hostile. But Peter always handles the pushback with calm and aplomb. He hears folks out, responds respectfully, and steers the conversation back to his thesis — that bias exists, and it can take forms that we don’t necessarily expect.

In a brief interview I did with him (see the video below), he tells a story about a case he handled, in which an appraiser’s report was found to exhibit bias to a homeowner whose political views he loathed. Peter tells this story in his class, and it always surprises people, because they’ve seen this divide in their own lives and can imagine something like this actually happening.

I thought I knew what bias looked like, but I’ve begun to realize that it can creep in when we’re least expecting it. —Hal Humphreys

I thought I knew what bias looked like, but I’ve begun to realize that it can creep in when we’re least expecting it. Recently I was laughing to a colleague at the notion of “luxury vinyl” plank flooring. “That’s an oxymoron,” I scoffed. “How can vinyl be ‘luxury’?”

“You just showed bias,” said the colleague. And I realized he was right. Lots of builders and consumers love LVP. It’s waterproof, low-maintenance, and easy to install. Some of it looks pretty good. I do NOT love it, and I probably won’t put it into my own house. I’m old school: I love hardwood floors and porcelain tiles, and I’ll splurge on nice materials whenever possible. But my flooring bias should never creep into my valuations. I shouldn’t assign a home a lower quality rating solely because it includes LVP. If buyers value it, that’s what counts.

The takeaway: you might harbor biases without realizing that’s what they are. They may seem innocuous, but they may sneak into your analysis all the same. That’s why I love how Peter Christensen approaches his class on valuation bias and fair housing law: He comes at it from an angle you won’t expect. He doesn’t accuse or shame anybody; he tells stories of how bias crops up in the real world — in the history of real estate, and in lawsuits and appraisals that have been challenged. He’s defended appraisers in matters before HUD and involving the CFPB, so he know how these cases play out, and he shares those stories in his class. His tone is one of deep experience, genuine curiosity, and intellectual humility.

Check our course catalog for Peter’s 7-hour class, Valuation Bias & Fair Housing Laws and Regulations. We’re running this course about every eight weeks this fall and winter, and the frequency will most likely pick up early next year.

Which brings me to some intel about a new CE requirement: I flinch a little when I mention this, because we’ve gotten some very angry (and even profane) responses when we’ve informed folks that the AQB has made this 7-hour class on bias and fair housing laws and regulations mandatory for licensed appraisers effective on January 1, 2026. Don’t murder the messenger. We’re not telling you what to do — we are not an all-powerful body with the power to mandate things. We merely inform, and so we’re just letting you know what the AQB has mandated.

If When you take this class, I predict you’ll discover that bias cases aren’t always what you expect, and you’ll learn what you didn’t know you didn’t know about fair housing laws. Maybe you’ll come away ready to challenge your own assumptions and rethink your definitions of bias and objectivity. I just ask you, humbly, to keep an open mind. Watch the video below to learn more.

 

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The New Appraisal Report: How One Company Is Rethinking Appraisal Software

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How are appraisal software providers retooling their products for UAD 3.6? One provider, Jeff Bradford, shares his thinking.

In the Appraisal Update podcast, I’m always talking about the “train of change” coming to the appraisal world. If you’re an appraiser, you probably rolled your eyes. We’ve heard this before, right? For years, people have said “change is coming,” but then… nothing. Same forms, same software, same grind.

But it’s real this time. The train is pulling into the station. 

I want to talk about a video from late last year that’s gotten a lot of attention, even from the GSEs. I think it struck a chord. So let’s talk about what it is, who created it, and why.

A couple of years ago, when the GSEs first announced the new UAD rollout, they effectively hit the reset button for everyone in appraisal tech. Software companies had been in the business of form-filling: They helped appraisers build reports by filling in forms, attaching images, adding addendums, and producing a PDF. 

Starting late this summer, the GSEs are going to ask us for something very different. They now want a dynamic report, not a static form. What that actually means is that instead of the old, static, one-size-fits-none forms, your data inputs will trigger a fluid logic tree of prompts, which will change depending on property type and other variables. (Some sections,  like summaries and reconciliations, will remain standard.)

Suddenly, the software companies are staring down a whole new paradigm.

From Form-Filling to Decision-Making

Jeff Bradford, founder and CEO of Bradford Technologies, says he’s in the publishing business. His software suite helps appraisers through the whole process of inspection, comp selection, and analysis, and pulls it all together to help them “publish” solid reports. 

Now he’s facing a radical ROV: a reconsideration of the value of his entire product line. In my interview with Bradford late last year, he walked me through how his strategy changed after the GSEs’ announcement. “We said, ‘Do we want to continue being in the form-filling business?’” he told me. “Why not rethink what appraisal software can be?” 

Instead of doubling down on smarter forms, Bradford’s company decided to walk away from the form-filling business entirely. They’re shifting their focus to the parts of the job that actually require an appraiser’s judgment—analysis, comparison, trend evaluation, market insight, etc. 

Bradford built software that does the heavy lifting. It gathers data. Lots of it. It slices and dices it for you, shows you the trends, and then helps you make quick, confident decisions. Then, instead of making you input all that stuff again into a form, it extracts your conclusions and automatically generates the data outputs needed for the report.

Sure, there’s still a bit of input required, but they’ve essentially flipped the model. You’re not filling out a form—you’re analyzing data. The form builds itself around what you decide.

To help explain this shift, Bradford created a short video (about 10 minutes long) that walks you  through it. You can watch that video here.

Rethinking the Appraisal Workflow

We live in an “on-demand” world. You can get groceries and furniture delivered same-day. Why can’t we deliver an appraisal in a similar timeframe? That became Bradford Technologies’ north star: speed. We already have accuracy. We appraisers are great at what we do. This software just helps us do it faster.

Their new approach had to hit three marks:

  1. Speed – Faster than current workflows.
  2. Actionable insights – Real tools for real decisions.
  3. Enjoyable experience – Yes, actually fun.

The software now includes things like scanning floor plans in real-time, extracting metadata from property photos using computer vision, and auto-populating sections based on existing data, all while keeping the appraiser in the driver’s seat. You decide what goes in. The software helps you get there faster.

Bottom line? The form-filling days are over. Appraisers aren’t form fillers. They’re analysts. They’re decision-makers. Tech providers are just there to help us do that job better.

One of the most intriguing technological advancements showcased in Bradford’s new system is computer vision. This tech can scan a property live, instantly gathering detailed data. This live data capture eliminates the tedious task of manually retyping information, because the system automatically gathers analysis results and creates the necessary XML files—specifically the UAD-compliant data—before building the final report.

Jeff Bradford refers to this as the “bridge to the future.” Bradford’s new software, called NightHawk, integrates property inspections, data gathering, and analysis all in one place, eliminating the need to jump between spreadsheets or multiple systems. It pulls public records, MLS data, satellite imagery, and other relevant sources, providing appraisers with a comprehensive data set within seconds. The result? Faster decision-making based on richer, more immediate information.

How to Be Prepared

The new UAD is fast approaching, with a full mandate expected by November 2026. Appraisers will soon be required to adopt these new standards, marking a definitive end to the old ways of doing things. To help you keep pace, I’d recommend resources like training courses, continuing education, etc. Fannie Mae has released some training on the new reports, which I find incredibly useful, even for non-appraisers. And at AeL, we’re teaching Fannie Mae’s course on the new URAR every month or so for the foreseeable future. (Find a session that works for you in our course catalog.) It’s also useful to attend industry events like Valuation Expo or the Appraisal Summit, both happening in Las Vegas later this summer, where you can talk to software providers and GSE reps in person and ask all your burning questions. 

As you contemplate UAD 3.6, you can well imagine the benefits of having solid software in your toolbox. I’m not trying to sell you on any specific product. There are lots of software providers, and you may have a favorite. But I wanted to talk to Jeff, because I think it’s useful to hear how a smart software guy like him is retooling his product to integrate with UAD 3.6. Every provider is going to have to do just that. And you can just imagine how features like in-report reconciliation, qualitative analysis for rentals, and the ability to embed photos directly where needed can help you get the job done faster and better.

The “train of change” is not just coming. It’s here. There’s going to be a learning curve. But if you’re an early adopter, you can leave your competition in the dust. You don’t have to go it alone. From CE providers, to software companies, to Fannie Mae, there’s plenty of information out there for appraisers wanting to learn more. What matters most is being prepared. Are you ready for the new appraisal report? If not, we’ll help you get there. —Bryan Reynolds

 

Watch the interview:

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Top 3 Mistakes Appraisers Make in Their Appraisal Reports

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After doing more than 2,000 appraisal reviews over the years, Bryan and his team have seen these same errors crop up again and again. Know them and avoid them.

I was an investigator for the state of Tennessee for many years. These days, I primarily help appraisers who find themselves in trouble. Sometimes we’re successful in resolving the issue entirely, or at least reducing the impact. Other times, it becomes a learning moment — we recognize mistakes, take responsibility, and strive to do better.

My team and I have conducted over 2,000 compliance, field, insurance, and litigation support reviews, and we’re noticing some recurring errors among appraisers. So let’s talk about the three most common errors we see appraisers make.

Hopefully, this will help you sharpen your tools and improve your practice.  Let’s get started.

Mistake #1: Omitting a key statement about an extraordinary assumption or hypothetical condition

Appraisers can gain some leeway with the right scope of work, and by properly using extraordinary assumptions and hypothetical conditions. But you must meet minimum reporting requirements.

It never hurts to review the definitions of “extraordinary assumption” and “hypothetical condition” in the USPAP standards. Then, check out Standard Rule 1, which talks about when it’s permissible to use these tools. There are three things you must do in your report if you’re using an extraordinary assumption or hypothetical condition. Most appraisers are doing the first two, but a lot are failing to do the third.

So let’s go over them. (And remember: forms don’t comply with USPAP— you do.)

Here are the three things you must do in your report:

  1. Clearly and conspicuously state when you are using an extraordinary assumption or hypothetical condition. That’s in Standard Rule 2-2(a)(xiii).
  2. State all extraordinary assumptions and hypothetical conditions. You don’t necessarily have to label them as such, but you do have to include them. For example: “I’m appraising this property as if the proposed house already exists, based on plans and specs.” That’s a hypothetical condition, even if you don’t explicitly call it that.
  3. State that the use of the extraordinary assumption or hypothetical condition may have affected the assignment results. This is the one that’s most often missed. It’s Line Item 702, and it’s critical. Even if you hate “can” or “may” statements (and I do), if that’s what it takes to be compliant, put it in there.

We see reports over and over where this final statement is missing. And that’s a problem. Reviewers have to note when they can’t find that language in your report, and that puts you in violation of Standard Rule 2-2(a)(xiii).

Mistake #2: Not summarizing the results of your analysis of the subject property’s prior sales

Let’s move on to the second most common mistake: prior sales. I’m talking about prior sales of the subject property and, depending on your form or client, even prior sales of comps or prior listings. Now, prior sales of comps aren’t a USPAP requirement, and neither are prior listings (unless they’re current), but prior sales of the subject property are a requirement. You’ll find this in Standard Rule 2-2(a)(x)(3). You’re supposed to summarize the results of your analysis of the subject’s prior sales, options, listings, etc.

Saying “the subject sold last year for $150,000” is not analysis. That’s just a statement of fact. What USPAP requires is a summary of your analysis. You’ve got to explain what that sale means in the context of your current appraisal, not just list the data point.

So, analyze the prior sale of the subject, and then in accordance with 2-2(a)(ix), summarize the results of that analysis. Maybe start a sentence by saying, “An analysis of the prior sale revealed…” then fill in the blank. This way, you’re answering the question you’re supposed to answer, and you’re summarizing the results of that prior sale or transfer.

Mistake #3: Including comps that aren’t really comparable

Here’s what landed in third place: including the universe of listings and sales as opposed to listing truly comparable sales.

The 1004 form, or the Uniform Residential Appraisal Report form, is what most appraisers use. This is a form many of you are very familiar with. At the top of page two, it says:

“There are ___ comparable properties currently offered for sale in the subject’s neighborhood, ranging from ___ to ___.”

“There are ___ comparable sales in the subject’s neighborhood within the past 12 months, ranging from ___ to ___.”

Now, if you truly are in an area where all the listings and sales in a neighborhood are in a competitive state for the same properties, then I guess you’d fill that in accordingly. But how often does that happen? I mean, are the two-bedroom homes competing for the same buyers as the four-bedroom homes?

I get it: we’re not searching just on price here. But isn’t that often how the market looks at buying property? They say, “This meets my utility. This fits my desires. This reflects scarcity. This fits my purchasing power.”

So, if you fill in the blanks with a range of prices from $90,000 to $2 million (yes, I’ve seen that), do you really think someone buying a $90,000 home has the purchasing power to buy a $2 million home? And do you think someone buying a $2 million home wants to buy a $90,000 home?

Maybe they’re pretty similar, but the $2 million property has a $1.9 million view — and the buyers are willing to pay for that — while the $90,000 property doesn’t. There can be all kinds of caveats, of course. But in general, when you put 720 comps in there, ranging from $90,000 to $2 million, it makes the reader scratch their head and wonder: are all of those truly “comparable”? Or are those just all the sales in a particular market area in the last 12 months?

Here’s a good rule of thumb: if you don’t feel like the sale would fit in one of these top positions — Comp 1, Comp 2, Comp 3, Comp 4, Comp 5, etc. — then it doesn’t belong up here in this equation.

And then, at least for Fannie Mae, keep in mind that where it says “Housing Trends” is actually comparable properties. The rest of it drives me crazy because, in bold capital letters, it says “Neighborhood” right here. So shouldn’t all this be relative to the neighborhood?

Yes. Say yes.

But that’s not what Fannie Mae says. Fannie says — and you can go to their Selling Guide to find this — that this one little box, “One-Unit Housing Trends,” should be comparable properties.

So, if all the properties in the neighborhood compete for the same buyers, then it would be one and the same. But if your subject property has certain comparables within that neighborhood that interchange with your subject property — and then there are others in the area that are not comparable — then this one little box, “One-Unit Housing Trends,” should just be comparable properties. (See B4 of the Fannie Mae Selling Guide on their website.)

Conclusion

I know we have lots of rules, regulations, requirements, lender overlays to deal with. I get a headache just thinking about it all. But stay in the loop. Educate yourself. And guys, get very familiar with USPAP, because it is your minimum requirement. Not a suggestion.

If you have a team, I’d encourage you to have regular meetings and talk about these things. And even if you’re a solo appraiser, find a way to collaborate with folks in the appraisal community. Join an association. Certainly, you can self-study and hone your skills, but the best way to stay sharp is to bounce ideas, suggestions, and techniques off one another.

Here’s a story I heard recently: Two lumberjacks arrived at 8:00 a.m. and chopped wood until 5:00 p.m. One lumberjack disappeared for an hour every day at noon. The other lumberjack did not. He might take a quick water break or something, but he was never gone for a whole hour.

The amazing thing? The lumberjack who disappeared for an hour always chopped more wood by the end of the day.

One day, the other lumberjack said, “We both come to work at 8:00 a.m. and work until 5:00 p.m. You disappear for an hour during the day, yet you always seem to be able to chop more wood than I do. What do you do during this hour that you disappear?”

And the first lumberjack said, “I go home, and I sharpen my axe.”

Sharpen your axe. You’ll be glad you did.

 

 

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An Appraiser’s Musings on Adaptive Reuse

How do we value the old made new? Adaptive reuse often walks a fine line between preservation and the bulldozer.

Once upon a time, a building was built for one noble purpose: the punishment of miscreants, the salvation of sinners, or the general improvement of society through the instruction and warehousing of its children. The rigorous application of steel bars and concrete walls, stained glass and wooden benches, chalkboards and rows of desk/chairs served us well for a time in penitence, worship, and education. Then, we, in our endless wisdom and grotesque irony, decided that such institutions were unnecessary — or at least too expensive to maintain. And so, the prisons were emptied, the schoolhouses abandoned, the churches left to the pigeons, and these fine, forsaken structures stood like forgotten tombstones of bygone purpose.

Until, of course, a developer caught wind of them, rubbed his hands together, and said, “Why, these would make lovely homes.”

Welcome to the age of adaptive reuse, where buildings once meant for industry, education, or incarceration are now retrofitted as a place to remand the great American dream — homeownership. It is a trend both noble and sometimes absurd, sustainable and occasionally grotesque, a testament to human ingenuity and a damning indictment of our inability to build anything new that isn’t a strip mall.

Take, for example, the old penitentiary. Once a haven for wayward souls with an overdeveloped enthusiasm for other people’s belongings, it has now been reborn as the Liberty Lorton Community in Virginia. Where once echoed the cries of the condemned, now rings the laughter of children. Where steel doors once clanged shut, now stands an open-concept kitchen with granite countertops. The transformation is complete — except, perhaps, for the occasional ghost of a long-departed inmate who rattles the pipes at night.

Not to be outdone, Melbourne’s circa-1851 Pentridge Prison has undergone a similar metamorphosis: a mixed-use development and “billion-dollar dining and entertainment precinct.”  The guard’s watchtower, from which many a convict was once observed plotting an escape, is now a charming architectural feature of someone’s living room. One wonders if the new occupants, sipping wine beneath the repurposed security bars, ever stop to consider the ironic poetry of their dwelling.

But why stop at prisons? Warehouses, schools, and even churches have become fair game in the adaptive reuse free-for-all. In Nashville, an old lumber mill has become a desirable community of single-family homes, its industrial bones repurposed into trendy loft-style abodes. Meanwhile, in Manhattan, the former Lincoln Correctional Facility, last known for housing petty criminals, is now the site of high-end real estate. One might call it a miracle of progress, or perhaps simply an elaborate joke played by time upon itself.

Valuing History

For the real estate appraiser, such transformations pose a conundrum: How does one assign value to a home where the kitchen was once a holding cell? How does the market account for a living room that once served as a place of prayer or punishment? The factors are many and bewildering.

Historical significance plays a role, of course. Buyers may clamor for a home steeped in history, so long as said history is charming rather than horrifying. A converted church, with its lofty ceilings and stained-glass windows, may fetch a premium. A converted slaughterhouse (Neuhoff Packing Plant, Nashville, TN), on the other hand, might require a more nuanced bit of marketing.

Then, there is the matter of location. The market cares little for poetry; a home is only as valuable as the market acceptance of the land beneath it. If an old schoolhouse sits in a prime neighborhood, it becomes a coveted relic of a more disciplined age. If it languishes in a forgotten corner of the world, it remains what it has always been — an abandoned schoolhouse, now with better insulation.

Economic viability must also be considered. The developer may dream of restoring history, but investors dream of profit. The costs of repurposing must not outweigh the potential gains, and so, adaptive reuse often walks a fine line between preservation and the bulldozer.

And finally, there are the ghosts — metaphorical and, in some cases, distressingly literal. Some buildings wear their past lightly; others carry it like a bad habit. Appraisers must weigh the unseen factors — buyer perception, cultural memory, and the unshakable feeling that the drain in one’s bathroom may have sluiced the fluids and viscera of cattle by the millions.

In the end, maybe adaptive reuse is often less about sustainability and more about the grand human refusal to let go of the past. We build prisons, fill them, empty them, and then move in ourselves. We abandon our schools and then call them home. We kneel in our churches, then convert them into luxury condos with vaulted ceilings and a faint whiff of incense. And through it all, the real estate market hums along, appraising, adjusting, and finding value in the most unexpected of places.

Perhaps, one day, this article will be rediscovered in the ruins of a former office building-turned-apartment-complex-turned-historical-landmark-turned-single-family home. And if so, dear reader of the distant future, let it be known: We did our best with what we had, and we had some odd ideas about home.

 

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What is a comp?

What’s a comparable property? Or a “comp,” as we say more informally?

Let me give you an example of an appraisal report I saw recently, which is why I’m asking this question: There are 65 comparable properties currently offered for sale in the subject’s neighborhood, ranging from a price of $330,000 to $5,400,000. The report also states that there are 44 comparable sales in the subject’s neighborhood within the past 12 months, ranging from $152,000 to $2.2 million. That’s a big range. Are you comfortable putting that in your report?

What does the term “comparables” even mean? Let’s go to the authoritative sources. Here’s one: The Dictionary of Real Estate Appraisal, published by the Appraisal Institute. It defines comparables as “a shortened term for similar property sales, rentals, or operating expenses used in the comparison in the valuation process and best usage. The thing being compared should be specified.” In other words, are you looking at comparable sales, comparable rentals, or comparable listings?

The next one I’ll read is from The Language of Real Estate: “[Comparables are] properties that have been recently sold or leased and are similar to the subject property sale. Prices of these properties are used to estimate a value for the subject property. Comparable properties need not be identical to the subject but should be similar and relatively easy to adjust for those differences in order to arrive at an indicated value for the subject. Also called ‘comparable sales,’ ‘comparable properties.’”

We refer to them as “comps” a lot.

Here’s a definition from an older book, Real Estate Appraisal Terminology, by the American Institute of Real Estate Appraisers: “An abbreviation for comparable property sales, rentals, incomes, etc., used for purposes of comparison in the appraisal process.” Here’s one from Barron’s Dictionary of Real Estate Terms: “Comparable sales — properties that are similar to the one being sold or appraised. Here’s an example. A subject property is a detached three-bedroom house that’s 30 years old and will be bought with an FHA loan. Comparables would be recently sold houses with similar style, age, location, and financing. Slight variations in characteristics may be taken into account when making the analysis.”

Lastly, I’m going to pull up the Encyclopedia of Real Estate Appraising. It’s a great big book, and it has a whole section on this. I highlighted one part of it because I like it: “What is a comparable property? It is one that would be a reasonable alternative for most prospective buyers who would be interested in the subject property.”

What is a comparable property? It is one that would be a reasonable alternative for most prospective buyers who would be interested in the subject property.” —Encyclopedia of Real Estate Appraising

That’s very simple, and it invokes some good, common sense.

So let’s think about what produces value: Scarcity. Utility. Desire. Purchasing Power. And let’s think about all that from the point of view of a typical buyer: Imagine you’ve found the perfect house. It has the number of bedrooms and bathrooms you want, the location and acreage you want. It’s charming, and there’s nothing else quite like it: you love it, and you could probably afford it. You’ve got utility, scarcity, desire, and buying power. So you knock on the door and ask the owner if she’d be willing to sell. She says no.

As a typical buyer, what would you consider as a reasonable substitute for that property? That is a comparable.

So let me ask you a question. Do you think a typical buyer interested in a $330,000 house, if it was no longer available, would go down the street and consider a $5,400,000 property as a substitute?

That’s a hard pill for this old Kentucky boy to swallow. Because I don’t think the typical buyer of that $330,000 house would have the purchasing power to buy a 5.4 million dollar property. And if we flip that equation, what about the typical buyer of a 5.4 million dollar property? Should it suddenly become unavailable, would they consider the $330,000 home instead? They can certainly afford it, but it probably doesn’t meet their utility. It’s probably not as big. They probably don’t desire it. I guess it’s possible, but it’s highly improbable.

When you’re doing your appraisal and using a form, it asks you: how many comparables are in the area in the last 12 months? How many are listings? They use that word comparable. So they’re not asking for the universe of sales, they’re not asking for the universe of listings. They’re asking for comparables. And if you truly believe in your heart and with your analysis that the two properties I described are comps, and you’re like “Hey, this is a quirky market, and you know, somebody that can buy a 5.4 million dollar house very well may you take the $330,000 dollar house as a substitute property,” okay — but be prepared to have support for that opinion.

Good judgement is your sharpest tool.

This article was adapted from the 2.4.24 episode of “The Appraisal Update” podcast, with Bryan Reynolds. Click below to watch it.

 

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The New UAD and What It Means for Appraisers

A Q&A with AeL Partner Hal Humphreys about the New UAD Redesign and Changes in the Industry

If you’re reading this, you probably know by now that appraisers are bracing for a sea change in how they build appraisal reports. But in case you’ve missed it, here’s a news flash: the 1004 form is going away, and appraisal reports as we know them will soon change forever. 

Why is this happening? The simple answer is that big organizations like Fannie Mae and Freddie Mac are leading a shift away from rote form-filling and toward an appraisal process that’ll be more focused on understanding and analyzing data. 

AeL partner and Appraisal Buzzcast host Hal Humphreys is a veteran appraiser and instructor who’s been paying attention to the industry chatter on social media and in CE classrooms and conferences nationwide. He’s gotten an earful from appraisers who are apprehensive about the industry’s future. Our new employee Heidi sat down with Hal via Zoom to ask what kind of resistance he’s seeing among fellow appraisers to the coming changes, what the implications of these changes are for the industry, and how appraisers can adapt their expertise to thrive as analysts in a quickly evolving valuation market.

This interview has been edited for length and clarity.

 

Appraiser eLearning: With the GSEs phasing out the 1004 form, what are the implications for appraisers? 

Hal Humphreys: I’d characterize the shift as colossal. It’s a whole new sport. With this new UAD rollout, appraisers will have to show their work in lending reports, requiring proficiency in analytics — a departure from their previous practice. This could involve methodologies like paired sales analysis or using statistical software. 

I believe it’s crucial for appraisers to enhance their data analytics skills and their ability to articulate statistical analysis. Ultimately, these skills are essential for drawing precise conclusions from sampled data.

AeL: What challenges do you anticipate appraisers might encounter as they transition from standardized form-based appraisal practices to a more nuanced analytical approach?

Hal: Having just returned from the ACTS Conference in Colorado, I noticed the appraisers that show up to conferences are the appraisers getting their heads around this shift. The data analytics stuff is not gonna be difficult for them because they’re already trying to do it. 

Some appraisers are still under the misconception that the new UAD is just another version of the 1004 form. The thing is: it’s not a form, and it’s not just learning how to do a new thing. It’s going to be a 6- or 8-month learning curve to get their head around how this works.

AeL: Can you elaborate on the importance of analytical skills in the future of real estate appraisals?

Hal: The basic math appraisers are expected to do is not terribly difficult — I don’t think anyone is expecting appraisers to do multiple linear regression analyses. What they want is for appraisers to look at a piece of property and determine if the market is increasing and to have support for the increased adjustment to the sales. I believe it’s going to be a matter of better understanding how to use factual verified data. It has to be verified. USPAP uses the word “must” a grand total of three times, always in the same context. Every time it says, “An appraiser must collect, verify, and analyze all information necessary for credible assignment results.” We must gather the information, we must verify it, and we must analyze it. 

There are a number of ways appraisers can use data analytics to extract adjustments from market information: They can use a depreciated cost analysis to identify specific adjustments for different items such as a deck versus a concrete patio, one fireplace versus two fireplaces, etc. Scott Cullen teaches how to do that at Appraiser eLearning, and has a software product called Solomon Adjustment Calculator that relies heavily on the depreciated cost.  

I’ve spoken with folks at different GSEs, and they’ve identified plus or minus 35 tools to help appraisers with data analytics. But the appraiser has to understand the basic theory and math behind the tool they’re using, and they’re responsible for what the software kicks out.

This data-driven approach opens up a whole world of appraisal work appraisers could do without fear and trepidation. If I were an appraiser solely focused on lending work, and then the market began to slow down, embracing data analytics and statistical analysis could revolutionize my practice. 

AeL: Do you foresee potential resistance or reluctance within the appraisal community to adopt these new changes? And if so, how might that resistance be addressed?

Hal: Yes, I do. But we are going to be switching to the new UAD. We do not have a choice. And it’s a perfect opportunity to learn how to integrate some of these tools. I’ve heard that some of the software providers will be providing an interface to build a report that then goes to the UAD. They’re all working on various tools to either integrate directly into their product or have an API handshake. 

During a recent conference, there was some resistance to the tune of: “USPAP doesn’t require me to show my work. Why are you asking me to show my work?” The answer came from the chief appraiser for the VA, who said something like: “You’ve done the work. You’re saying it’s in your work file, then show your work. It doesn’t take any more time.” 

What to say to appraisers who have concerns? We simply have to roll up our sleeves and adapt because change is inevitable. Appraisal work, especially in the lending sector, is undergoing shifts to meet the requirements of entities like Fannie Mae and Freddie Mac. And it’s worth noting that there’s a vast landscape of appraisal opportunities beyond lending, many of which demand even more rigorous documentation and explanation of methodologies. Rather than viewing these changes as obstacles, they could be opportunities to enhance the professionalism and credibility of our field. 

AeL: What do appraisers stand to gain from beefing up their analytical skills and embracing a more data-driven approach to valuation?

Hal: This data-driven approach opens up a whole world of appraisal work appraisers could do without fear and trepidation. If I were an appraiser solely focused on lending work, and then the market began to slow down, embracing data analytics and statistical analysis could revolutionize my practice. 

By integrating these skills into your reports, you transition from merely meeting minimum requirements to becoming a more proficient appraiser. This data-driven approach not only enhances lender work but also opens doors to diverse appraisal opportunities, such as divorce or litigation cases. Currently, the only people taking divorce or litigation assignments are the ones already comfortable showing their work and using data analytics to validate their conclusions. Understanding data analytics equips you to handle a broader range of assignments with confidence, even during market slowdowns. While the adjustment may be challenging for some initially, it ultimately leads to significant professional growth and expanded opportunities.  —Heidi Reuter

 

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